Archive for April 8th, 2010

My life is now devoted to saving America from the European-style national sales tax known as the value-added tax. Writing in the New York Post today, I explain that the impact of a VAT in Europe is bigger government, not smaller deficits:

The real-world evidence shows that VATs are strongly linked with both higher overall tax burdens and more government spending. In 1965, before the VAT swept across Europe, the average tax burden for advanced European economies (the EU-15) was 27.7 percent of economic output, versus 24.7 percent of GDP in the United States. But the Europeans began imposing VATs in the late 1960s, and now the European Union requires all members to have a VAT of at least 15 percent. Good news has not followed. By 2006, the average tax burden for EU-15 nations had climbed to 39.8 percent, versus 28 percent in the United States. The spending side? In 1965, pre-VAT, government spending in EU-15 nations averaged 30.1 percent of GDP, against 28.3 percent in the United States. By 2007, government spending consumed 47.1 percent of GDP in EU-15, significantly higher than the US burden of 35.3 percent. Nor has the VAT stopped Europe from raising other taxes. Taxes on income and profits consumed 8.8 percent of GDP in Europe in 1965 — below the US level of 11.9 percent. By 2006, the European burden had climbed to 13.8 percent of GDP, slightly higher than the 13.5 percent US figure. (The same trend holds for corporate-tax data.)

Even though I’ve been in Washington almost 25 years, I am endlessly amazed at the chutzpah of people who support higher spending and bigger government while piously lecturing the rest of us about the need to control deficits. Fed Chairman Ben Bernanke is a good (though “bad” might be a better term) example of this hypocrisy. He was an avid supporter of bailouts and so-called stimulus, yet the Washington Post reports that he is now hectoring us to be fiscally responsible:

Federal Reserve Chairman Ben S. Bernanke warned Wednesday that Americans may have to accept higher taxes or changes in cherished entitlements such as Medicare and Social Security if the nation is to avoid staggering budget deficits that threaten to choke off economic growth. “These choices are difficult, and it always seems easier to put them off — until the day they cannot be put off anymore,” Bernanke said in a speech. “But unless we as a nation demonstrate a strong commitment to fiscal responsibility, in the longer run we will have neither financial stability nor healthy economic growth.”